Westar Energy outlines coal procurement at Kansas power plants

Westar Energy (NYSE: WR) said in its Feb. 24 annual Form 10-K report that it largely has its coal needs for the time being locked up under long-term contracts.

Looking at the coal situation by plant:

Jeffrey Energy Center (JEC)

The three coal-fired units at JEC have an aggregate capacity of 2,146 MW, of which Westar owns or consolidates through a variable interest entity (VIE) a combined 92% share, or 1,975 MW. It has a long-term coal supply contract with Alpha Natural Resources for Powder River Basin (PRB) coal out of Wyoming. The contract contains a schedule of minimum annual MMBtu quantities. All of the coal used at JEC is purchased under this contract, which expires Dec. 31, 2020. The contract provides for price escalation based on certain costs of production. The price for quantities purchased in excess of the scheduled annual minimum is subject to renegotiation every five years to provide an adjusted price for the ensuing five years that reflects the market prices at the time of renegotiation. The most recent price adjustment was effective Jan. 1, 2013.

The BNSF Railway and Union Pacific Railroad transport coal to JEC under a long-term contract. The contract term continues through Dec. 31, 2020, at which time Westar plans to enter into a new contract. The contract price is subject to price escalation based on certain costs incurred by the railroads. The average delivered cost of coal consumed at JEC during 2015 was about $1.74 per MMBtu, or $29.01 per ton.

La Cygne Generating Station

The two coal-fired units at La Cygne have an aggregate capacity of 1,398 MW. Westar’s share of the units is 50%, or 699 MW, of which it either owns directly or consolidates through a VIE. La Cygne uses primarily PRB coal but one of the two units also uses a small portion of locally-mined coal. The operator of La Cygne, Kansas City Power & Light (KCPL), arranges coal purchases and transportation services. Approximately 95%, 90% and 35% of La Cygne’s PRB coal needs are under contract for 2016, 2017 and 2018, respectively. About 90%, 85% and 100% of those commitments under contract are fixed price for 2016, 2017 and 2018, respectively. As the PRB coal contracts expire, Westar anticipates that KCPL will negotiate new supply contracts or purchase coal on the spot market.

All of the La Cygne PRB coal is transported under KCPL’s rail transportation agreements with BNSF through 2018 and Kansas City Southern Railroad through 2020. During 2015, Westar’s share of average delivered cost of coal consumed at La Cygne was approximately $1.88 per MMBtu, or $32.64 per ton.

Lawrence and Tecumseh Energy Centers

Lawrence and Tecumseh centers have an aggregate generating capacity of 539 MW. Westar purchases PRB coal for these centers under a contract with Arch Coal that provides for 100% of the coal requirements for these facilities through 2017. BNSF transports coal for these energy centers under a contract that expires in December 2020.

During 2015, the average delivered cost of coal consumed in the Lawrence units was about $1.75 per MMBtu, or $31.30 per ton. The average delivered cost of coal consumed in the Tecumseh units was around $1.76 per MMBtu, or $31.46 per ton.

Westar Energy is Kansas’ largest electric utility. Westar has 7,200 MW of capacity fueled by coal, uranium, natural gas, wind and landfill gas.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.